OP
OP
Tropical
Dryer sheet aficionado
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sorry please disregard this post. posted by mistake.
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Super confused... feeling DEVASTATED & hopeless... need advice on my plan?
- Thread starter Tropical
- Start date
The max contribution for a Roth IRA and a traditional IRA for 2023 is $6500 in aggregate. You can divide up your $6500 any way you want between those two types of accounts, so your plan of putting $3K into each one is fine as long as you have at least $6K in earned income this year.
Only the amount you contribute to a traditional IRA gets you a tax deduction now though. If you put $3K into your tIRA, then it lowers your taxable income for this year by $3K. You do have to pay the tax later on when you withdraw the money.
You said you've "been through" multiple sclerosis. That's not something that just goes away. What are your plans for managing your off-grid lifestyle when your MS flares up? Or were you dealing with someone else's MS?
racy
Full time employment: Posting here.
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This post is driving me CRAZY and the more I read the more AGITATED I get. /s But I sincerely hope the OP gets all the help they need.
OP
OP
Tropical
Dryer sheet aficionado
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I just watched this video on youtube... hope I'm allowed to post links here? I'm referring to this video:
Which discusses "Afraid You Won't Retire a Millionaire?" and he used annuity to ensure person would never run out of 40k/year for certain number of years. Or an annuity that is set up so that it never stops making payments (perpetuity).
How often do people use this annuity option? Wouldn't it offer more peace of mind to ensure money won't run out of the stock market crashes? Is this the main reason someone would use this option?
Which discusses "Afraid You Won't Retire a Millionaire?" and he used annuity to ensure person would never run out of 40k/year for certain number of years. Or an annuity that is set up so that it never stops making payments (perpetuity).
How often do people use this annuity option? Wouldn't it offer more peace of mind to ensure money won't run out of the stock market crashes? Is this the main reason someone would use this option?
skyking1
Thinks s/he gets paid by the post
the big difference you can make is the self employed 401K, as far as deferring taxes now.
You could put $22,500 into that account in 2023, to start with.
You could put $22,500 into that account in 2023, to start with.
OP
OP
Tropical
Dryer sheet aficionado
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Thanks yes I looked into that. Once I start earning more money with my business again I will surely look into using solo 401ks (right now it doesn't make sense because I do not have enough funds to contribute and I see there are additional costs to operating solo 401k it seems) to really take advantage of tax free withdrawals. I also saw interesting video on using multiple Roth IRAs.
[MOD EDIT]
For now I need to keep things simple as possible so I have decided I am going to simply max out Roth IRA along with contribute funds to a taxable account at vanguard for now. I have an entire year to decide if I will be selling my house or not. I hope my situation will be a bit better by then.
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skyking1
Thinks s/he gets paid by the post
yes that is good and you have next year to solidify a plan for funding things like the 401K, the roth, and also look at the thread here about I-bonds.
GhostofTomJoad
Recycles dryer sheets
agreed.
Many on this forum have an aversion to annuities. Annuities are expensive and most of the time an investor is likely to do much better with other financial vehicles. But for some people, whose biggest risk is that they will not hold onto their money and invest and spend it wisely for whatever reason, the expense of an annuity might be worth it in trade for the certainty. If you have a clear-eyed understanding of the expense, how the annuity compares to other financial options, and a realistic understanding of whether you can exercise the necessary financial discipline to keep your finances safe from your own foibles for the rest of your life, you can make an intelligent choice. For example, someone who has a gambling issue or other vice/situation that can drain their funds, or someone who is particularly likely to fall for get rich quick schemes, could logically determine that the most important financial move they can make is to protect their assets from foolish decisions they themselves might make in the years ahead by putting part of their assets in an annuity. The expense could be worth it. It is not the only option for an investor who cannot trust themself to be financially logical and disciplined, but it is one. Just my two cents. I know someone who put part of his assets into an annuity for this very reason and it makes sense for him.
jollystomper
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Tropical, I get the sense that you are churning the waters looking for things that will guarantee you will have enough to retire in 20 years.
The problem is, as you have learned from your "100% can't fail plan to retire at 40", nothing is guaranteed. While all the good advice here will increase the odds, they are not guarantees. It seems to me, you are going from one thing to another, asking "but what about <X>?", hoping to get a "yes, that is a sure thing for your situation". But, in my view, to be kind but blunt, there is no sure thing.
The best you can do is to follow the answer to the question "what is the best way to walk from New York to Los Angeles?" The answer: one step at a time.
So start with the simple steps:
1. Sell the house and move into something lower cost.
2. Invest your house profits very simply, in a taxable account as that is the easiest to start with. Use either the three funds that you mention in your original post, or, given your propensity for trying to find a "guarantee", a target retirement fund for the year 2043 or later, as that will automatically rebalance so that you are not tempted to do something crazy based on market conditions.
3. Figure out your income and budget to live below your means (LBYM). It does not mean you need to eat cat food and walk everywhere. It means you live at a level that you have money left over to save and invest.
4. With the money you can save an invest, look to leverage the 401k or Roth IRA. But do not agonize over it until you figure out step 3 above.
5. Decide if you want to have SS and Medicare available when you are age eligible. If yes, then you need ensure (via W-2 or personal/business income) that you pay those taxes to become eligible for them. If you do not care, or living in Hungary you will not need them, then do not worry about them.
6. Use tools like FIRECalc to check your progress along the way.
Everything is peripheral and a distraction. Take the steps to establish a foundation. Once the foundation is in place, *then* you can looking at other options.
None of this will guarantee you will be where you want to be in 20 years. We cannot predict the future. It is not just dependent on the market, but also dependent on your income. But you have to start somewhere to have even a chance. That is the context in which I make my suggestions. Good luck.
The problem is, as you have learned from your "100% can't fail plan to retire at 40", nothing is guaranteed. While all the good advice here will increase the odds, they are not guarantees. It seems to me, you are going from one thing to another, asking "but what about <X>?", hoping to get a "yes, that is a sure thing for your situation". But, in my view, to be kind but blunt, there is no sure thing.
The best you can do is to follow the answer to the question "what is the best way to walk from New York to Los Angeles?" The answer: one step at a time.
So start with the simple steps:
1. Sell the house and move into something lower cost.
2. Invest your house profits very simply, in a taxable account as that is the easiest to start with. Use either the three funds that you mention in your original post, or, given your propensity for trying to find a "guarantee", a target retirement fund for the year 2043 or later, as that will automatically rebalance so that you are not tempted to do something crazy based on market conditions.
3. Figure out your income and budget to live below your means (LBYM). It does not mean you need to eat cat food and walk everywhere. It means you live at a level that you have money left over to save and invest.
4. With the money you can save an invest, look to leverage the 401k or Roth IRA. But do not agonize over it until you figure out step 3 above.
5. Decide if you want to have SS and Medicare available when you are age eligible. If yes, then you need ensure (via W-2 or personal/business income) that you pay those taxes to become eligible for them. If you do not care, or living in Hungary you will not need them, then do not worry about them.
6. Use tools like FIRECalc to check your progress along the way.
Everything is peripheral and a distraction. Take the steps to establish a foundation. Once the foundation is in place, *then* you can looking at other options.
None of this will guarantee you will be where you want to be in 20 years. We cannot predict the future. It is not just dependent on the market, but also dependent on your income. But you have to start somewhere to have even a chance. That is the context in which I make my suggestions. Good luck.
HI Bill
Thinks s/he gets paid by the post
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Why are you even worrying about this? At your stated age and asset level, it won't be a problem for you.
OP
OP
Tropical
Dryer sheet aficionado
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You do not know me personally, my contacts in business, let alone in my personal life to make such a bold statement on what I can or cannot accomplish.
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By posting on here, you invite comment on the things that you have posted. Arguing with people who respond to your request for help is not productive. If you do not agree with their suggestions, just ignore them.
FloridaWizard
Dryer sheet wannabe
Trop,
If the "lost opportunity" was a MLM scheme, I hope you now understand the error of your ways and won't repeat the mistake.
You are way too anxious to do something right away. Put the house proceeds in a money market fund for a year and use the time to educate yoursel .on investments, retirement planning, and risk management.
I have a family member with bipolar disorder, and your writings remind me of that person when they were in a manic phase. We always made sure they made no important decisions in that state. Not saying you have that condition, just urging you to find mental peace before you do anything rash.
The go-slow part is good but I need my $ to be working for me. I sold my property and bought a much cheaper place. With the $250,000 allowance, buying another house and my cost basis - property improvements, rent house, etc.., I doubt I will show a taxable gain. I don't think the rent houses deprecation will hurt me when my taxes are done. As an 80-year-old widow, I need to be careful in my investments. My $ is in a brokerage account, I've been given some suggestions, put a portion in short term CD's. I hesitated because I thought the Feds. said they probably would raise the rates two more times. My goal is to supplement my SS (my only income) and have my $300,000 give me income. I do not want an annuity. Safety, some income and a little growth is what I want. I appreciate different suggestions.
TheWizard
Thinks s/he gets paid by the post
Please start a new thread for this...
Major Tom
Thinks s/he gets paid by the post
I think the best advice that has been given to OP so far in this thread is to take a deep breath and calm down. Of course, telling someone who is freaking out to calm down is rarely helpful, so perhaps the best advice was simply to take a deep breath!
Tropical - you have an awful lot of questions, which is understandable - and it's good that you do. If you give yourself some time to think about it before taking any action at all, you'll be able to spend lots of time reading. You can probably find everything you need to know online - as long as you have a reasonably good BS detector. I doubt that anyone here learned everything they needed to know about saving and investing for retirement in a few days, or even a week or so. Take comfort in the fact that you don't need to learn everything right now.
Be inquisitive, and take your time. When I first became actively interested in investing for retirement, I came home from work every day, had a bite to eat, and spent a glorious few hours reading everything I could find on every good website and forum I knew about. I looked forward to coming home and spending the evening reading and learning. Rome wasn't built in a day, and you shouldn't expect to gain all the knowledge you need in a few weeks either. It takes time. The good thing is that you appear to have it.
Read everything you can find in this forum that seems relevant. There's a lot of good information here.
Tropical - you have an awful lot of questions, which is understandable - and it's good that you do. If you give yourself some time to think about it before taking any action at all, you'll be able to spend lots of time reading. You can probably find everything you need to know online - as long as you have a reasonably good BS detector. I doubt that anyone here learned everything they needed to know about saving and investing for retirement in a few days, or even a week or so. Take comfort in the fact that you don't need to learn everything right now.
Be inquisitive, and take your time. When I first became actively interested in investing for retirement, I came home from work every day, had a bite to eat, and spent a glorious few hours reading everything I could find on every good website and forum I knew about. I looked forward to coming home and spending the evening reading and learning. Rome wasn't built in a day, and you shouldn't expect to gain all the knowledge you need in a few weeks either. It takes time. The good thing is that you appear to have it.
Read everything you can find in this forum that seems relevant. There's a lot of good information here.
I'm late to this thread and read a few posts at the beginning and skimmed several more, and saw your big concern was you could not put much of your lump sum money into IRAs or Roths, a slight counter to that is a SEP/IRA where you can put 25% of your income, but there is an alternative to all tax deferred plans.
There is nice perk (loophole) in the tax code regarding Long Term Capital Gains. That is, if filing as single, you could withdraw in LTCGs as much as $55,524 and pay $0 in federal tax and no SS, not sure about your state tax. How that works, in today's dollars you withdraw $100,000, of that $44,476 is your original investment $55,624 is the growth, or your LTCGs. So on a tax form your gross is $55,624 minus the standard deduction of $13,850 leaves a AGI of $41,674. If married filing jointly, the numbers are about double. As long as your AGI is below $41,675 you owe $0 in Federal tax. Now, if you can live on the $55,624 or less, you can reinvest the difference between $100,000 you withdrew and what money you needed for spending. The reinvestment will increase your cost basis, which which is a good thing. Note: there is no tax due on your growth until you sell, although you may owe a little tax yearly on unqualified dividends that your mutual funds or ETFs pay each year.
Something to keep in mind, These number rise every year, so in 20 years the above numbers could all be double. There is a possibility those that govern could take the perk away, but I think it has been on the books a long time, I could not find a date it started. Here is a link to inform you about the $0 tax on LTCGs.
https://www.cnbc.com/2023/02/15/her...023-and-pay-0percent-capital-gains-taxes.html
You have to look at the profit on your $600k home sale, price minus commissions, minus cost basis. Then look into the $250k one time home sale tax free income. Also look at whether some of the profit can be rolled into your next home, reducing any possible tax even lower. I think you will probably not owe any tax, but it depends on your cost basis and how much you roll into the next home.
You are now thinking correctly about piling money away for the future, be aware it is a journey not a sprint, if your investments do the average of historical returns, you could see the amounts double every 5 or 6 years with your additional yearly investments. The time will get slightly longer as your yearly investments become smaller in relation to the size of your portfolio. The stock market is volatile, so you will see times when you balance drops, and times when you are killing it! Just hang in there.
Here is my favorite calculator, experiment with the numbers to see where you could be in 20 yrs.
Compound Interest Calculator
Also you stated, $100,000 and living on $25k with $75k savings, don't forget to subtract money to pay income taxes. Even saving $50k a year is HUGE.
There is nice perk (loophole) in the tax code regarding Long Term Capital Gains. That is, if filing as single, you could withdraw in LTCGs as much as $55,524 and pay $0 in federal tax and no SS, not sure about your state tax. How that works, in today's dollars you withdraw $100,000, of that $44,476 is your original investment $55,624 is the growth, or your LTCGs. So on a tax form your gross is $55,624 minus the standard deduction of $13,850 leaves a AGI of $41,674. If married filing jointly, the numbers are about double. As long as your AGI is below $41,675 you owe $0 in Federal tax. Now, if you can live on the $55,624 or less, you can reinvest the difference between $100,000 you withdrew and what money you needed for spending. The reinvestment will increase your cost basis, which which is a good thing. Note: there is no tax due on your growth until you sell, although you may owe a little tax yearly on unqualified dividends that your mutual funds or ETFs pay each year.
Something to keep in mind, These number rise every year, so in 20 years the above numbers could all be double. There is a possibility those that govern could take the perk away, but I think it has been on the books a long time, I could not find a date it started. Here is a link to inform you about the $0 tax on LTCGs.
https://www.cnbc.com/2023/02/15/her...023-and-pay-0percent-capital-gains-taxes.html
You have to look at the profit on your $600k home sale, price minus commissions, minus cost basis. Then look into the $250k one time home sale tax free income. Also look at whether some of the profit can be rolled into your next home, reducing any possible tax even lower. I think you will probably not owe any tax, but it depends on your cost basis and how much you roll into the next home.
You are now thinking correctly about piling money away for the future, be aware it is a journey not a sprint, if your investments do the average of historical returns, you could see the amounts double every 5 or 6 years with your additional yearly investments. The time will get slightly longer as your yearly investments become smaller in relation to the size of your portfolio. The stock market is volatile, so you will see times when you balance drops, and times when you are killing it! Just hang in there.
Here is my favorite calculator, experiment with the numbers to see where you could be in 20 yrs.
Compound Interest Calculator
Also you stated, $100,000 and living on $25k with $75k savings, don't forget to subtract money to pay income taxes. Even saving $50k a year is HUGE.
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Smoeller
Dryer sheet wannabe
No option
As was stated earlier, you dont have the option of putting the 300k into an IRA
Deposits in a traditional or Roth ITA must be from earned income
Things are so uncertain at this time I would suggest that you take the 5-6% from Treasury Bonds CDs etc and keep your powder dry and your windfall in tact until the fiture clears a bit
IMO......Better to have 300$ ++ than possibly 200k as the market flounders
As was stated earlier, you dont have the option of putting the 300k into an IRA
Deposits in a traditional or Roth ITA must be from earned income
Things are so uncertain at this time I would suggest that you take the 5-6% from Treasury Bonds CDs etc and keep your powder dry and your windfall in tact until the fiture clears a bit
IMO......Better to have 300$ ++ than possibly 200k as the market flounders
